Taxpayers face a £1.1 billion bill in the future because of Birmingham City Council’s failure to cut debts, opposition Tories claim.
Those are the long-term projections of cutting repayments and extending loan terms on the £3 billion debt currently held by Britain’s largest local authority.
But in the short to medium term, the changes to the council’s repayment schedule will see annual savings in the region of £50 million a year - money which the council’s Labour leadership say will be used to reduce the impact of Government cuts.
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But after 20 years taxpayers will be spending more on the debt and, depending interest rates, projections suggest the extra cost will reach £1.1 billion by 2080, according to Opposition Conservative leader Coun Robert Alden.
Coun Alden said: “We have 19 years of savings and 47 years of increases. In the full term it will cost us £1.1 billion more. We are just putting more debt on to future taxpayers.”
He also warned the council not to use the money for short term benefit, but consider sustainable investment which would deliver savings going forward.
Labour deputy leader Ian Ward replied that once inflation is taken into account and future fluctuations in debt and interest the costs will change.
He argued that many councils are now refinancing their debt over 60-80 year periods to cut annual payments.
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He said: “It is a process similar to remortgaging.
“The new policy is still considered prudent and reasonable, but is more affordable. Clearly these savings are considerable, estimated to peak next year at £58 million.
“However, the council continues to face huge government grant reductions and rising costs in key services such as Children’s Services.
“The savings will only help us deal with these ongoing impacts and provide funding to assist with the implementation of the necessary actions. They will not remove the need for significant cuts over the next three years.
“The fact is that the council will still need to get its expenditure down to a sustainable level, given the government funding cuts and service pressures it faces.”
And added that the savings would be invested in a sustainable way, not just plugging budget holes.